11 July 2024

Your GSK Pension and climate change – 2023 update

You can also read the full TCFD report.

Why climate change matters for your GSK pension

We, as Trustees of the GSK pension plans, make decisions about how and where to invest your retirement savings. These investments are potentially impacted by climate change.

Pension schemes can play a crucial role in managing climate change by considering these risks when investing. That’s why, each year, pension schemes are required to publish a climate-related report setting out the approach to managing and monitoring these risks. There will also be some positive investment opportunities from moving to a low-carbon economy, through investing in companies who are better prepared to manage these risks.

What we’re doing about climate change

We recognise climate change as one of the most important issues of our time. Our annual climate report includes assessing the impact of these risks on pension investments and developing a plan to mitigate these.

We have set the following target:

"The Trustees commit to the aims of the Paris Agreement, expecting to reduce carbon emissions associated with its portfolio by at least 50% (from 2019 levels) by 2030 and to reduce carbon emissions to ‘net zero’ by 2050."

We track progress against the target, by primarily looking at the estimated carbon footprint of investments, which is used as a measure of the Plans’ investments in emissions-intensive companies.

How are we doing against our targets?

We are pleased to have made significant progress towards our target, with our carbon footprint reducing since 2019 by 25% for the Defined Benefit (DB) Sections, and 46% for the Defined Contribution (DC) Sections.

That’s equivalent to removing over 29,000 cars from the road or planting over 22,000 trees.

What about ESG?

Alongside an increased emphasis on climate-related considerations, we also recognise the importance of other ESG (Environmental, Social, Governance) factors as well as the importance of sustainability in a broader sense. This view is also reflected in the management of the Plans’ investments.

FAQs

What is climate change?

Climate change refers to the global heating and changing weather patterns caused by Greenhouse Gas ("GHG") emissions arising from human activity, mainly burning fossil fuels.

As global average temperatures rise versus pre-industrial times, the entire climate system is impacted. This leads to the increased frequency and severity of weather events, such as droughts, rises in sea-levels, floods, heatwaves and wildfires.

What are the risks of climate change?

Pension investment is potentially impacted by the risks posed by climate change in the form of physical threats - such as extreme temperatures or floods – and transition challenges as economies and society adapt to shifts in policy and technology.

Companies that are less prepared for these risks may be negatively impacted in the long-term, and investing in such companies may lead to poorer investment returns than investment in companies which are more resilient to climate risks.

How does the 2023 report compare to last year?

In our latest TCFD report, there has been a slight uptick in the carbon footprint of the DB Section since the previous year but this was driven by changes in data recording.

Climate reporting, though critical for understanding climate risks, is still relatively new and faces several challenges, including data quality, consistency of data availability across asset classes and changes in methodology. As climate reporting evolves, we may expect to see reported carbon emissions rise in the short-term. Overall, progress remains on track and the position is very much positive against the 2019 base year.

What is ESG integration?

ESG integration involves considering three important relevant factors that can impact long-term returns on an investment:

Environmental factors encompass how well nature is maintained and protected.
Social factors examine business relationships with employees, suppliers, customers and the community.
Governance factors examines the internal business practises and procedures that companies adopt.

How is ESG incorporated?

For DB and DC members, ESG considerations are factored into the selection and ongoing review of investment managers, including a focus on how these managers engage with companies on these important topics.

For DC members, ESG considerations are integrated into the default investment strategy, the GSK Lifecycle Drawdown Option. We also offer a standalone ESG-focused fund in the self-select fund range – the "GSK Global Sustainable Equity Fund". Further detail can be found on the GSK Global Sustainable Equity Fund factsheet.

Where’s the full report?

Each year, we publish our Task-Force on Climate-Related Financial Disclosures (TCFD) report, which sets out how the Trustee continues to identify, assess and manage climate-related risks and opportunities.

Governance: Our governance structure for climate-related risks and opportunities
Strategy: Our assessment of actual and potential impacts of climate risks and opportunities and scenario analysis which considers how the Plans may be affected by a rise in global average temperatures
Risk Management: How climate-related risks are identified, assessed and managed
Metrics: The metrics used to measure of climate impact:
- Total Greenhouse Gas
- Carbon Footprint
- Weighted average carbon intensity (‘WACI’)
- Implied temperature rise
- Science-Based Targets Initiative Alignment (DB Sections only)
- Data Quality (DC Section only)

More information?

Notes

"GSK Plans" refer to GSK Pension Scheme, GSK Pension Fund, Glaxo Wellcome Contracted-Out Money Purchase Scheme and SmithKline Beecham Pension Plan.

¹Carbon footprint is an intensity measure of emissions that assesses the level of greenhouse gas emissions arising from a $1 million investment in a fund.